News & Commentary:

October 2011 Archives

Articles/Commentary

Going for growth in a go-slow worldLowell Bryan, John Horn, and Sven Smit (McKinsey Quarterly) Oct 1, 2011
No matter what happens, investors will reward companies that master the art of growing under pressure.

A 'China Round' of Trade TalksArvind Subramanian (PIIE/Business Standard) Oct 1, 2011
One way to signal that the world community recognizes the need to deal with a dominant China in the future, and to do so multilaterally, would be to put to bed the Doha Round and embark on a new round of trade negotiations. The aim of such a "China Round" would in fact be to anchor China, to the maximum extent possible, in the multilateral trading system.

Where the Skills AreRichard Florida (Atlantic) Oct 1, 2011
In today’s expanding cities, social skills are becoming ever more essential to economic growth.

The Next Russian RevolutionChrystia Freeland (Atlantic) Oct 1, 2011
Outside Moscow, the Kremlin is making plans for a Russian Silicon Valley. But while tech companies are on board, the Russian people are less enthusiastic.

Six Pac(k)in'Bill Gross (PIMCO) Oct 1, 2011
There are no double-digit investment returns anywhere in sight for owners of financial assets. Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor. There is only a New Normal economy at best and a global recession at worst to look forward to in future years. If global policymakers could focus on structural as opposed to cyclical financial solutions, New Normal growth as opposed to recession might be possible.

The Eurozone Crisis and the US Economy: What Has Gone Wrong?John H. Makin (AEI) Oct 1, 2011
Simultaneous economic crises in the United States and Europe have created a serious threat to the world economy. Recent US stimulus efforts have failed to boost the economy, and this pattern is likely to continue with future proposed stimulus plans. Many of Europe’s problems stem from its adoption of a monetary union, which has increased shared risk from southern European sovereign debt. No easy solutions to these crises exist; one crucial, but inadequate, step is for central banks in Europe and the United States to work together to preempt deflation.

The world economy: Be afraidEconomist Oct 1, 2011
Unless politicians act more boldly, the world economy will keep heading towards a black hole

Making globalisation work for workersSascha O Becker, Marion Jansen & Marc Muendler (VoxEU) Oct 1, 2011
As jobs losses continue to haunt the headlines, people are left asking if long-term unemployment is to be one of the so-called benefits from globalisation. This column reports on a conference aimed at understanding how globalisation can be made to work for workers.

How Argentina left its EurozoneEduardo Levy Yeyati (VoxEU) Oct 2, 2011
One of the many proposals for escaping the Eurozone crisis is to follow in the footsteps of Argentina since its currency fiasco a decade ago. This column points out the realities of such a path: regressive wealth transfers and debt dilution. Against this dismal backdrop, a fiscal union might well be a better option.

Does fiscal stimulus work in a monetary union? Evidence from US regionsEmi Nakamura & Jón Steinsson (VoxEU) Oct 2, 2011
A major question facing many governments in the rich world today is whether we should try to stimulate the economy by increasing government spending. This column exploit variation in military spending across US states and identifies a fiscal multiplier of around 1.5. It then suggests that aggregate fiscal stimulus should have large output multipliers when the economy is at the zero lower bound.

Holding China to AccountPaul Krugman (NYT) Oct 2, 2011
Legislation that would threaten sanctions against currency manipulators won't solve our economic problems on its own, but it can contribute to a solution.

The Wrong Tax for EuropeKenneth Rogoff (Project Syndicate) Oct 3, 2011
There is ample reason to be angry at financiers, and real change is needed in how they operate. But the European Commission's proposal to tax financial transactions, despite its noble intellectual lineage, is no solution to Europe’s problems – or to the world's.

The Power to End PovertyBan Ki-moon (Project Syndicate) Oct 3, 2011
This month, the Millennium Villages Project launches its second five-year stage. Around Africa, and now around the world, governments are scaling up the lessons from this project and others like it: empower communities, help them to invest in their futures using cutting-edge technologies, and thereby end extreme poverty.

How to rescue the euro: Ten commandmentsHans-Werner Sinn (VoxEU) Oct 3, 2011
No simple solution to the euro crisis exists. This column argues the heart of the Eurozone’s woe is a balance-of-payments crisis whose solution requires real adjustment of prices and wages in the periphery countries. It proposes Ten Commandments that balance the need for discipline with the need to minimise panic when a crisis does strike.

Currency wars: Lessons from the US experienceMichael Bordo & Owen F Humpage (VoxEU) Oct 3, 2011
The Great Recession has resulted in sharp exchange-rate changes and threats of ‘currency wars’ linger. Some countries – notably Japan and Switzerland – have shown an interest in foreign-exchange intervention. This column argues that sterilised intervention does not afford monetary authorities a means of systematically affecting their exchange rates independent of their domestic policy objectives. Countries that engage in currency wars run a real risk of shooting themselves in the foot.

The Markets for ContagionMohamed El-Erian (PIMCO/Reuters) Oct 3, 2011
Friday’s worldwide sell-off was a fitting end to a miserable month and a horrible quarter for equity markets.

China or the US? Make your choiceGideon Rachman (FT) Oct 3, 2011
With the US government borrowing 40 cents of every dollar that it spends – and China the largest foreign buyer of US debt – the Chinese are indirectly funding American military dominance of the Pacific.

How to Value a CurrencyArvind Subramanian (WSJ) Oct 3, 2011
Broadly, there are two approaches to assessing whether a currency is over or under-valued: macroeconomic and development. Both these define or provide a sense of an “equilibrium” exchange rate, that is, what the level of the exchange rate ought to be at a point in time. Comparing this with the prevailing exchange rate gives a sense of over- or under- valuation. The assessment cannot be precise because an equilibrium exchange rate depends on many factors, changes over time, and the underlying determinants cannot be measured accurately.

Market controls: does intervention work?John Beck (The Banker) Oct 3, 2011
With a notorious reputation for destabilising companies, short sellers are obvious targets when the markets start to crash, and short selling bans are almost always implemented at the crux of a financial crisis. Yet there is little evidence to prove that such bans aid recovery. To the contrary, some economists suggest that they may negatively affect the market, causing decreases in trading volumes and making it harder and more expensive to trade.

Complexity Mathematics, the EU and Global GovernanceAndrea Illy (Globalist) Oct 4, 2011
Linear thinking is no longer sufficient when it comes to global governance. Supranational governance — such as that practiced in the EU — is a real-world exercise in non-linear complexity management.

Managing financial integration and capital mobility: Lessons from emerging marketsJoshua Aizenman & Brian Pinto (VoxEU) Oct 4, 2011
With the merits of a globally integrated economy in question, this column reviews the policy lessons from two decades of policy in emerging markets aimed at opening up their economies. It also outlines the steps countries have taken to reduce exposure to financial crises and argues that these may be the best option while policymaking at the G20 level is stuck in a stalemate.

Bleed the ForeignerHarold James (Project Syndicate) Oct 4, 2011
The economists’ commonplace that a monetary union demands a fiscal union is only part of a much deeper truth about debt and obligation. Debt is rarely sustainable if there is not some sense of communal or collective responsibility.

The Euro Area: Moving in the Right Direction?Jacob Funk Kirkegaard (PIIE) Oct 4, 2011
Despite its failure to reach the fiscal targets mandated by the International Monetary Fund (IMF) this year and next, Greece is certain to get the next tranche of its IMF bailout funding. The reason is that Athens did enough last weekend to comply with the austerity program in the eyes of the euro group and the IMF. Finally, for example, the Greek government and parliament have agreed to begin laying off previously unsackable public sector workers. Measured against Greece's dire economic situation, the government's intention to transfer up to 30,000 public sector workers nearing retirement age to reduced-pay status, effectively forcing them to retire right away, is hardly an overwhelming policy response. But in light of the country's accelerating recession, the political symbolism was clear.

How to keep the euro on the roadMartin Wolf (FT) Oct 4, 2011
The eurozone needs a credible path of adjustment, at whose end we see weaker economies restored to health. If such a path is not found it will fracture.

What Financial Crisis?Holman Jenkins (WSJ) Oct 4, 2011
Politicians aren't the only ones in denial about new realities.

Grim Outlook for U.S. Foreign AidJames M. Lindsay (CFR) Oct 4, 2011
For U.S. voters, domestic economic problems trump international crises around the world. As a result, cutting foreign aid is inevitable, and the U.S. government will end up doing less.

The Wrong Way to Deal With ChinaNYT Oct 4, 2011
A Senate bill to punish countries that manipulate their currencies is a bad idea. If Beijing retaliates, it could damage the American economy further.

After Long Delay, US FTAs with Korea, Colombia, Panama Submitted to CongressBridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The push to pass the US free trade agreements (FTAs) with Colombia, Panama, and South Korea is quickly gaining momentum, with the White House submitting the pacts to Congress on 3 October after years of back-and-forth political wrangling. The US House of Representatives is expected to vote on the three FTAs early next week, in tandem with voting on a controversial worker aid programme that delayed the pacts' passage over the summer months.

Russia Picks Up Speed on Road to WTO AccessionBridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The last month has seen trade officials make a concerted push toward resolving the remaining hurdles in the Russia WTO accession process in the hopes that Russia could become the global trade body's 154th member by December's ministerial conference. Recent reports indicate that Moscow may have clinched the outlines of an agreement with the EU, while Russian officials announced yesterday in Washington that they are close to an accession deal.

India Leads Group of 26 Nations Against EU Aviation Emission LevyBridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
A group of 26 countries last week came together in New Delhi, India for a two-day meeting to protest against the EU's decision to charge airlines departing from and arriving in the EU for their emissions. The EU initiative to address emissions from the aviation sector has sparked strong opposition by several countries and airlines - some of which have now banded together to dispute the EU decision.

US Senate Gears Up for China Currency VoteBridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The US Senate is prepared to take up legislation targeting China's valuation of its currency, with senators voting on Monday 3 October to begin debate on a bill that would allow the US to impose duties on countries that undervalue their currencies. The move has provoked a stern response from the Chinese government, which has cautioned that such legislation could lead to a trade war between the two countries.

European Commission Puts Renewed Pressure on EPA NegotiationsBridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The European Commission announced on 30 September that countries that have concluded an Economic Partnership Agreement (EPA) with the EU without having taken the steps to ratify and implement them will be withdrawn from the Market Access Regulation as of 1 January 2014 onward. Should these developing countries not ratify an EPA by this new deadline, they could potentially lose their free access to the EU market.

Eight Countries Sign Anti-Counterfeiting Trade PactBridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The controversial Anti-Counterfeiting Trade Agreement (ACTA), a multi-country intellectual property trade agreement that has been in negotiations since 2006, was signed on Friday by eight countries, including the US. Representatives from the eleven negotiating parties gathered in Tokyo, Japan on 1 October for the ACTA signing ceremony. The pact has been a source of substantial debate in terms of the agreement's potential impact on non-signatory countries.

Countries Struggle at Panama Climate Meeting on Road to DurbanBridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
Climate change measures with trade implications continue to create friction during negotiations taking place in Panama City, Panama this week as part of the final preparations for December's United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP). Two major areas of discussion have already spurred countries to come forth with strongly-worded proposals in efforts to safeguard trade and economic development. The first relates to the possible negative impacts of unilateral measures taken to address climate change; the second relates to global sectoral approaches to mitigate emissions.

A Liquid EuropeDaniel Gros (Project Syndicate) Oct 5, 2011
The eurozone might just be stepping back from the brink – that is, if a new framework to resolve the ongoing sovereign-debt crisis includes liquidity support for solvent governments. If investors knew that a liquidity squeeze was no longer possible, they would refrain from speculative attacks on such governments' bonds.

No Country for Young OligarchsAlexander Etkind (Project Syndicate) Oct 5, 2011
This past June, Mikhail Prokhorov, one of Russia's richest men, formed a political party to contest December’s parliamentary elections, seeming to believe that his business experience would boost his political prospects. He was wrong.

The democratic transitionFabrice Murtin & Romain Wacziarg (VoxEU) Oct 5, 2011
As witnessed during this year’s Arab Spring, democracy doesn’t always emerge smoothly. This column examines the long march toward political freedom since 1800. It argues that while both income and education affect democracy, the rise in primary education has been the main driver of democratisation over 1870-2000.

Obama is upside down on tradeClyde Prestowitz (FP) Oct 5, 2011
In trying to build public support for congressional ratification of Free Trade Agreements with Colombia, Panama, and South Korea, President Obama is telling audiences that "these agreements will support tens of thousands of jobs across the country for workers making products stamped with three proud words: Made in America".

How a Good Idea Became a TragedySpiegel Oct 5, 2011
The Greek crisis has revealed why the euro is the world's most dangerous currency. The euro was built on a foundation of debt and trickery, where economic principles were sacrificed to romantic political visions. The history of the common currency is the story of a good idea that turned into a tragedy of epic proportions.

How the Euro Zone Ignored Its Own RulesSpiegel Oct 6, 2011
After they joined the euro zone, the countries of southern Europe suddenly discovered they could borrow money at German-style rates, and any hope of sorting out their dodgy finances vanished. But it was France and Germany who set the worst example, when they broke the euro-zone rules they had forced on others.

Mubarak’s Odious DebtsSaifedean Ammous (Project Syndicate) Oct 6, 2011
The interest that Egypt pays on its foreign loans is larger than its budget for education, healthcare, and housing combined, accounting for 22% of government expenditures. For the sake of Egyptians and people living under tyranny everywhere, Egypt’s government must take a brave stand by voiding these debts as "odious."

India, China lead gold rushRaja Murthy (AT) Oct 6, 2011
China has joined the few countries with ATMs that dispense bullion and gold coins. It is the latest indication of the yellow metal's popularity in Asia, where consumer demand surged 25% in China in the past year and 38% in India.

Save the euro – let Greece defaultPhilip Stephens (FT) Oct 6, 2011
In the longer term the numbers cannot be made to add up, and Greece’s politics are not getting any better.

What Options Are Left for the Common Currency?Spiegel Oct 7, 2011
Politicians have maneuvered their countries into an unparalleled situation in the euro crisis. And they already know what most voters don't yet suspect. In the end, only two possibilities will remain to save the beleaguered common currency: an expensive transfer union or a smaller monetary union. Either solution will be extremely costly.

The Euro’s Hard Rain FallsLeif Pagrotsky (Project Syndicate) Oct 7, 2011
Politicians and bankers made grave errors that contributed to the current euro crisis. But, regardless of how bad Europe's political and financial leaders may seem, a sudden rise in the number of incompetent or immoral individuals throughout the eurozone's periphery is not a credible explanation of this crisis.

The cost of financial ignoranceHernando de Soto (WP) Oct 7, 2011
Federal Reserve Chairman Ben Bernanke said recently that, given the ongoing credit contraction, "advanced economies like the U.S. would do well to re-learn some of the lessons" that have led to success among emerging market economies. Ironically, those economies in the 1990s accepted 10 points for promoting economic growth that were known as the "Washington Consensus."

It’s a trade warRobert J. Samuelson (WP) Oct 7, 2011
U.S. is right to push China to revalue its currency.

Here we go againEconomist Oct 8, 2011
The Europeans are pushing the global banking system to the edge.

Greek rescue - if onlyReuven Brenner (AT) Oct 8, 2011
There is a sensible way out of crisis for Greece (beyond revenues from transporting the Mediterranean's natural resources), as Ireland has shown. But there is nothing in it for the bureaucrats in Brussels and the International Monetary Fund.

The rise of the renminbi as international currency: Historical precedentsJeffrey Frankel (VoxEU) Oct 10, 2011
Over the last few years, use of China’s currency for international trade has been growing steadily. Some argue this is the start of a journey that will see the renminbi displace the dollar and become the international reserve currency within a decade. This column asks whether such prophecies are realistic by looking at how other international currencies established themselves.

A Nobel for Non-KeynesiansDavid R. Henderson (WSJ) Oct 11, 2011
People's expectations about government policy make it difficult for officials to affect the economy in the ways they intend to.

The Case for Free-Trade LeadershipMary Anastasia O'Grady (WSJ) Oct 11, 2011
Mexico's growth in investment and trade, both imports and exports, shows the benefits of open borders.

Lessons of the Irish ComebackMichael Hasenstab (WSJ) Oct 11, 2011
Investors would be shortsighted to overlook the country's progress. Other indebted governments would have to be blind.

Coco for EuropeBarry Eichengreen (Project Syndicate) Oct 11, 2011
After a year and half of delay and denial, Greece is about to restructure its debt. But this by itself will not be enough to draw a line under the eurozone’s existential crisis, for which so-called "contingent convertible bonds," or "cocos," might be the answer.

Milton Friedman’s Magical ThinkingDani Rodrik (Project Syndicate) Oct 11, 2011
Free-market enthusiasts’ place in the history of economic thought will remain secure. But thinkers like Milton Friedman leave an ambiguous and puzzling legacy, because it is the interventionists who have succeeded in economic history, where it really matters.

Europe's Misuse of the Term 'Tobin Tax'John Williamson (PIIE) Oct 12, 2011
The European Union, citing the term "Tobin Tax," is discussing a tax rate of 0.1 percent on all financial transactions with the principal objective of raising revenue. Note the emphasis, because these details have created a misleading impression. When the economist James Tobin first called for a new tax (Tobin 1972, 1977), he advocated a tax rate of perhaps 0.5 percent on changing one currency into another with the principal objective of discouraging short-term speculative transactions. What is currently under discussion by the European Union (2010) is thus quite different even though it is often described as a Tobin tax. The only similarity is that both aim at taxing some financial transactions.

First aid is not a cureMartin Wolf (FT) Oct 11, 2011
One-sided and unduly hasty offsetting adjustment would exacerbate the downturns in the eurozone and world economies. What is needed is financing and adjustment.

The Swedish model for Europe’s bail-outAnders Borg and Carl Bild (FT) Oct 11, 2011
The challenges to secure financial stability and restore market confidence are similar to what Sweden faced during our banking crisis in the early 1990s, but on a European level.

The Broken ContractGeorge Packer (FA) Oct 11, 2011
Like an odorless gas, economic inequality pervades every corner of the United States and saps the strength of its democracy. Over the past three decades, Washington has consistently favored the rich -- and the more wealth accumulates in a few hands at the top, the more influence and favor the rich acquire, making it easier for them and their political allies to cast off restraint without paying a social price.

Euro's Affordable Salvation, in 5 StepsLaurence Kotlikoff (Bloomberg) Oct 11, 2011
German Chancellor Angela Merkel and French President Nicolas Sarkozy are in a terrible bind. They don’t want financially distressed European governments to default. But they can’t afford to keep them solvent.

Broad-based Growth Can Counter Inequality, Instability—StiglitzIMF Survey Oct 11, 2011
Countries should strive to achieve high, broad-based growth to avoid potential political instability triggered by rising inequality, economist Joseph Stiglitz tells a Washington conference. An increasing GDP does not necessarily mean that life is getting better for all a country’s citizens, he adds.

Money and banking – realigned efficientlyHans Gersbach (VoxEU) Oct 12, 2011
Current macroeconomic policymaking suffers from an inadequate range of instruments and the absence of a comprehensive assignment of responsibilities. This column introduces a new CEPR Policy Insight designed to remedy these shortcomings. It proposes a framework for monetary, macroprudential, and microprudential policies.

Time for euro bonds – but with conditionsJohn Muellbauer (VoxEU) Oct 12, 2011
The Eurozone is staggering under the weight of serious problems, including a democratic deficit for greater fiscal union; missing incentives for the fundamental structural reforms expected but not delivered by monetary union; failure to narrow divergent unit labour costs; burden sharing widely perceived to be unfair; and a loss of confidence among edgy international investors. This column argues that conditional euro bonds could help resolve these problems.

Euro bonds without cross-country subsidisation? Yes, we canAngelo Baglioni amp; Umberto Cherubini (VoxEU) Oct 12, 2011
One of the main objections to the idea of euro bonds is that Germany would be guaranteeing the debt of Greece, among other cross-country subsidies between the core and the periphery. This column argues that this need not be the case.

Wall Street's Gullible OccupiersPeter Wallison (WSJ) Oct 12, 2011
The protesters have been sold a bill of goods. Reckless government policies, not private greed, brought about the housing bubble and resulting financial crisis.

A Standby Program for the EurozoneRaghuram Rajan (Project Syndicate) Oct 12, 2011
The world has a large stake in the resolution of the eurozone’s problems, but those problems might soon become too big for the eurozone's members to address. Fortunately, the world has an institution that can channel the help that Europe needs: the IMF.

Repeating the FutureNeel Kashkari (PIMCO) Oct 12, 2011
Look globally for the companies with strong balance sheets that are best positioned to thrive in the multi-speed global economy. For long-term investors, meaning those prepared to stay invested for three, five and even 10 years, who can endure volatility, we believe equities can offer attractive returns. In an extended period of slow economic growth and deleveraging, interest rates are likely to remain low. Actual income generation from investments is important. Hopefully society can institutionalize the lessons from this crisis so that future generations don’t repeat it: Individuals, corporations and countries should only borrow to fund long-term investment, not current consumption.

Pass the China Currency BillPeter Morici (AT) Oct 12, 2011
The United States' trade deficit is destroying more US jobs, yet President Barack Obama and House Speaker John Boehner, for now, oppose the one measure that could transform that situation - the China Currency Bill.

Does the Euro Have a Future?George Soros (NYRB) Oct 13, 2011
To resolve a crisis in which the impossible becomes possible it is necessary to think about the unthinkable. To start with, it is imperative to prepare for the possibility of default and defection from the eurozone in the case of Greece, Portugal, and perhaps Ireland. To prevent a financial meltdown, four sets of measures would have to be taken.

Slovakia's stand against bailoutsNita Ghei (WT) Oct 12, 2011
Countries around the world are inching ever closer to bankruptcy. The response from politicians has been the predictable call for yet more government intervention in the marketplace. So it's worthy of note when a tiny nation is willing, if only temporarily, to take a stand against bailouts.

Nobels Give Econometrics Pioneers Their DueLars Peter Hansen (Bloomberg) Oct 12, 2011
Thomas J. Sargent and Christopher A. Sims richly deserve the Nobel Memorial Prize in Economic Sciences they were awarded this week for their seminal work in the fields of macroeconomics and time series econometrics.

European Court Opinion Suggests Aviation Emission Levy LawfulBridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
The EU's plan to extend its emission trading scheme (ETS) to aviation is fully compatible with international law, an official opinion of the trading bloc's highest court found last week, dismissing a high profile challenge by American airlines.

US FTAs with Korea, Colombia, Panama Face Long-Awaited Congressional VoteBridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
After four years of political limbo, the US free trade agreements with South Korea, Colombia, and Panama are scheduled for votes in both chambers of the US Congress later today. The free trade agreements are largely expected to clear both the Senate and the House; a vote in the House on a controversial worker aid programme blamed for slowing down the pacts' passage this summer is also expected shortly.

Panama Climate Meet Sets Stage for Outcomes in DurbanBridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
UN climate negotiators trudged forward on a range of issues at a major meeting last week in Panama City, but slow progress on trade issues and the questions over the future of the Kyoto Protocol bode poorly for chances of finalising a robust package this year.

WIPO Assemblies Call for Diplomatic Conference on Audiovisual PerformancesBridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
Last week, the World Intellectual Property Organization's (WIPO) 184 member states brought their annual Assemblies meeting to a close with a landmark decision to hold a diplomatic conference in 2012 for a treaty on the international protection of audiovisual performances, as proposed by the Standing Committee on Copyright and Related Rights (SCCR) in June of this year.

Pressure on China Currency, Subsidies Builds in WashingtonBridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
Tensions are ramping up between Beijing and Washington on trade and currency issues, with the US Senate passing legislation on Tuesday 11 October that effectively targets China's valuation of its currency. The vote comes just days after US Trade Representative Ron Kirk announced that Washington had submitted information to the WTO detailing over 200 subsidy programmes that the US claims China failed to notify the global trade body.

Disputes Roundup: US Finds Trade Success both on Home Front, WTOBridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
Trade found its way onto the agenda of both the US' and EU's highest courts this week, with the European Court of Justice releasing a legal opinion on aviation levies - see related article, this issue - and the US Supreme Court ruling on the Department of Commerce's anti-dumping calculation method. Meanwhile, a WTO panel established to hear a US complaint over Chinese restrictions on electronic payment services issued a preliminary decision on 30 September that rejected Beijing's claim that Washington's complaint was unlawful.

The Instability of InequalityNouriel Roubini (Project Syndicate) Oct 13, 2011
Any economic model that doesn’t properly address inequality will eventually face a crisis of legitimacy, as today's global protests are now demonstrating. Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, eventually harming long-term economic growth and welfare.

Libya’s Shadow on Sovereign Wealth FundsEfraim Chalamish (Project Syndicate) Oct 13, 2011
As Libya’s citizens rebuild their lives and economy, undoing the corruption in the Libyan Investment Authority, the sovereign wealth fund in which the Qaddafi regime stashed and misused Libya’s oil wealth, is becoming a priority. Whatever the outcome, all sovereign wealth funds – and

Eurozone banks must be freed from national capitalsNicolas Véron (VoxEU) Oct 13, 2011
Europe, and the Eurozone especially, is years into an economic crisis. This column argues that if the euro is to survive, Eurozone citizens will have to accept the surrender of economic policy decision-making on an unprecedented scale.

A bad haircut is not forgotten quicklyJuan José Cruces & Christoph Trebesch (VoxEU) Oct 13, 2011
What are the financial costs of a sovereign default? This column presents new data on investor losses – haircuts – in all sovereign debt restructurings between 1970 and 2010. Countries imposing high haircuts take significantly longer to reaccess capital markets after the event and subsequently pay higher interest rates.

Crowds and constitutions: Insights from IcelandThorvaldur Gylfason (VoxEU) Oct 13, 2011
Iceland’s economic meltdown has led to a change in its constitution. This column, by one of the 25 people elected to draft the new document, documents the journey.

Time has come for some intelligent policymakingMartin Wolf (FT) Oct 13, 2011
As Deng Xiaoping said, “it does not matter if a cat is black or white, so long as it catches mice.” Who cares if a policy is called fiscal or monetary, so long as it works?

Insurance is way to stabilise eurozonePaul Achleitner (FT) Oct 13, 2011
While politicians feel they have just accomplished an enormous task, the markets once again feel this lacks credibility.

What haircut for Greece?Paolo Manasse (VoxEU) Oct 14, 2011
Markets are already prepared for a Greek default. This column says the real question is not whether Greece will default – it is how big a haircut will be imposed on creditors and what the consequences will be.

Global: Crisis, Credibility and Institutional ChangeSpyros Andreopoulos (MS GEF) Oct 14, 2011
The restoration of credibility requires, ultimately, the policy authority at the epicentre to relinquish some policy flexibility by committing itself to follow a rule.

The vital fewReuven Brenner (AT) Oct 15, 2011
The tendency of successful family businesses to rise and fall within three generations is well documented. Countries can similarly squander resources. A common element is the unwillingness of those in charge to consider what they can put back into, rather than plunder from, their heritage.

The Water HegemonBrahma Chellaney (Project Syndicate) Oct 14, 2011
International discussion about China’s rise has focused on its increasing trade muscle, growing maritime ambitions, and expanding capacity to project military power. One critical issue, however, usually escapes attention: China’s rise as a riparian hegemon with no modern historical parallel.

Making HIV/AIDS Investments CountBjørn Lomborg (Project Syndicate) Oct 14, 2011
Funding from developed governments for efforts to combat HIV/AIDS is dropping – a trend that must be reversed. But we also need to acknowledge that billions of dollars have been spent on well-meaning attempts to save lives, with an alarming lack of high-quality evaluation of how these investments have performed.

It's Not Just the CurrencyNYT Oct 15, 2011
The United States and its allies need to find better ways to persuade China to change policies that are both battering the global economy and damaging its own future.

G-20 Reaffirms Commitment to Resolve CrisisIMF Survey Oct 15, 2011
Finance ministers and central bank governors of the Group of Twenty (G-20) industrialized and emerging market economies said they remained committed to take all necessary actions to preserve the stability of banking systems and financial markets, as they wrapped up their final meeting before the G-20 Leaders’ Summit in Cannes.

Stepping Up from Regional Influence to a Global RoleMoshin Khan (PIIE) Oct 16, 2011
Asia is in a strong position to assert itself in global financial governance. The remarkable growth of the economies in the region and their integration in global trade and finance bestow upon Asian states considerable potential clout in international forums and institutions. However, Asia's current influence is not yet commensurate with its economic weight in the International Monetary Fund (IMF), arguably the premier institution in global finance.

The Global Jobs ChallengeMichael Spence (Project Syndicate) Oct 17, 2011
Over the past three decades, hundreds of millions of new workers have entered the global economy, bringing tremendous growth in income levels, opportunities, and the size of the global economy. But these new workers have also brought more employment competition, which has had profound distributional effects.

Capping interest rates to stop EZ contagionBernard Delbecque (VoxEU) Oct 17, 2011
It is widely recognised that without a firewall around illiquid but solvent Eurozone countries, a loss of confidence in the markets could increase interest rates to levels high enough to make any country insolvent. The aim of this column is to propose a concrete plan to build such a firewall and halt the spread of contagion of the debt crisis to Italy and Spain.

Brazil as a commodity exporter – opportunities & risksMarkus Jaeger (DB Research) Oct 17, 2011
Rapid commodity-intensive industrialisation, population growth and rising per capita incomes in the emerging markets should continue benefit the Brazilian economy over the medium term. An over-reliance on commodity exports, if not skillfully managed, tends to have a number of detrimental effects, however. Creating a solid framework for dealing with the expected pre-salt-related revenue windfall, reforms targeting productivity growth and a strong fiscal adjustment are necessary if a potentially risky shift towards an economic model that relies too much on domestic consumption and improving terms-of-trade is to be avoided.

Barrels, Bushels, and BondsJeffrey Frankel (Project Syndicate) Oct 17, 2011
Commodity-exporting countries have been booming in recent years, but they are highly vulnerable to a sudden plunge in dollar prices, as a result of a new recession, an increase in US real interest rates, fluctuations in climate, or random sector-specific factors. Commodity bonds may offer a neat way to circumvent these risks.

Faltering China carries global riskFrancesco Sisci (AT) Oct 18, 2011
As China's growth falters, the country is having to contend with too many doubtful loans, too much new property, and a squeeze on small, exporting businesses. The impact on Europe and the United States could exacerbate their economic problems in a dangerous cycle with huge implications.

Language imperialism - 'democracy' in ChinaThorsten Pattberg (AT) Oct 18, 2011
Since European languages have their own histories and traditions, they cannot sufficiently render Chinese concepts, such as shengren and minzhu, which are erroneously translated as "philosophers" and "democracy". The solution would be to not translate the most important foreign concepts at all, but adopt them.

As Kaldor’s Facts Fall, Occupy Wall Street RisesPeter Orszag (Bloomberg) Oct 18, 2011
In Economics 101, students learn that the share of national income received by labor stays roughly constant with the share received by capital. This is the first of “Kaldor’s stylized facts,” articulated half a century ago by the Cambridge economist Nicholas Kaldor. Recent experience betrays this lesson. Over the past two decades -- and especially since about 2000 -- the share of national income that flows into wages and other kinds of worker compensation has been plummeting in various countries.

There is no sunlit future for the euroMartin Wolf (FT) Oct 18, 2011
It is conceivable – if unlikely – that the eurozone will find ways to manage its emergency. It is inconceivable that it will cure the illness.

America at Stall Speed?Mohamed A. El-Erian (Project Syndicate) Oct 19, 2011
Judging from the skittishness of both markets and “consensus expectations,” US economic prospects remain truly confusing. This situation is both understandable and increasingly dangerous for America’s well-being and that of the global economy.

The Bankers’ Capital WarHoward Davies (Project Syndicate) Oct 19, 2011
Almost everyone nowadays agrees that banks need more capital. But a wide gap has opened up between financial authorities and the banks on the costs and benefits of the much higher capital requirements that regulators are now demanding.

Human development in Africa: A long-run perspectiveLeandro Prados de la Escosura (VoxEU) Oct 19, 2011
How has Africa performed over the long-run in terms of wellbeing? This column aims to answer this question by improving the UN’s Human Development Index. By looking at data stretching from 1870 to 2007, it argues that human development in Africa is lower than previously thought and that compared to the developed world, Africa stopped catching up in 1980 and began to fall behind.

All That Glitters Is Not a Cash EquivalentJerome Schneider (PIMCO) Oct 19, 2011
With proper liquidity management, we believe investors are able to make more prudent selections with their intermediate cash. The latest volatility has investors asking questions about the securities they own, in particular probing any exposures to European issuers. Cash investors often over-allocate to money market and bank investment vehicles, while the most attractive risk-adjusted opportunities might fall just outside of this space. We currently see opportunities in short-dated, non-financial BBB-rated corporate bonds, along with dollar-hedged bonds and bills issued by sovereigns with solid balance sheets.

Finish Line "Clearly in Sight" for WTO Govt Procurement Deal: ChairBridges Weekly Trade News Digest Volume 15, Number 35 Oct 19, 2011
Forty-two countries are close to finalising a deal that would liberalise access to billions of dollars worth of public procurement contracts, the chair of the WTO committee on government procurement said yesterday. Delegations are being urged to finish negotiations by the global trade body's December ministerial.

US, EU Press for China Currency RevaluationBridges Weekly Trade News Digest Volume 15, Number 35 Oct 19, 2011
Pressure is growing from the EU and US for China to loosen its strict control of its currency, particularly amid new reports of slowing Chinese trade growth. EU trade chief Karel de Gucht and US Treasury Secretary Timothy Geithner have lately reiterated the call for China to revalue the yuan - however, Chinese Premier Wen Jiabao has made clear in recent statements to Chinese media that his government would endeavour to keep the yuan stable.

Brazil Continues Push against Import SurgeBridges Weekly Trade News Digest Volume 15, Number 35 Oct 19, 2011
Tensions are building between Brazil and its trade partners over imports, with the Brazilian government announcing on 4 October an investigation on whether China is shipping footwear to the South American country via Vietnam and Indonesia to avoid paying an antidumping tariff. Meanwhile, Japan and South Korea reportedly raised concerns at a WTO committee meeting last week over Brasilia's new imported car tax increase.

US Lawmakers Challenge China on Solar SubsidiesBridges Weekly Trade News Digest Volume 15, Number 35 Oct 19, 2011
Chinese subsidies to solar panel producers are increasingly drawing attention from US lawmakers, as Washington deals with the aftermath of US solar panel maker Solyndra's bankruptcy filing last month. At a news conference on Friday 14 October, Sander Levin - the top Democrat on the powerful House Committee on Ways and Means - called for the US to step up and protect its solar industry from Chinese competition.

Revealed – the capitalist network that runs the worldAndy Coghlan and Debora MacKenzie (New Scientist) Oct 19, 2011
As protests against financial power sweep the world this week, science may have confirmed the protesters' worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.

Stepping Up from Regional Influence to a Global RoleMoshin Khan (PIIE/East Asia Forum) Oct 19, 2011
Asia is in a strong position to assert itself in global financial governance. The remarkable growth of the economies in the region and their integration in global trade and finance bestow upon Asian states considerable potential clout in international forums and institutions. However, Asia's current influence is not yet commensurate with its economic weight in the International Monetary Fund (IMF), arguably the premier institution in global finance.

The Bogey of Fiscal StimulusJomo Kwame Sundaram (Project Syndicate) Oct 20, 2011
Despite the need for strong and sustained fiscal stimulus in many countries, today's political leaders seem to be held hostage by financial interests and associated media, ideologists, and oligarchs. As a result, the main threat that now confronts us is not public debt or inflation but rather a downward economic spiral.

A deadline for solving a deadly Eurozone sovereign debt crisisGuillermo de la Dehesa (VoxEU) Oct 20, 2011
Time is running out for EU leaders to put an end to the Eurozone crisis. This column explains how leaders could find a definitive solution to Greece insolvency, isolate solvent countries from possible Greek contagion, improve EU governance by creating a true European parliament, and refocus on a pro-growth policy mix.

South-South free trade agreements: A work in progress?Ganeshan Wignaraja (VoxEU) Oct 20, 2011
South-South trade and trade agreements are booming amid the stalled Doha trade talks and a fragile world economy. In Asia alone, trade agreements have grown from only 3 to 61 between 2000 and 2010. This column examines Asia’s experience and argues that South-South trade agreements should increase their coverage of goods and services and improve consistency with global rules to fully support South-South trade.

Challenges and Opportunities in the Era of Population AgingKim Jeung-Kun (SERI Quarterly) Oct 20, 2011
Despite including some of the most populous nations in the world, East Asia’s demographic future has become one of population decline. Three out of every ten elderly people will be East Asian by 2035. Low rates of childbirth and changing cultural obligations toward parents require novel solutions, including the development of new “senior friendly” industries.

The Impact of China’s Aging PopulationMuqun Li (SERI Quarterly) Oct 20, 2011
China is like its Asian neighbors in that it is aging rapidly, and will soon face a declining workforce, and increasing labor and healthcare costs. Unlike its neighbors, however, China is facing a future where it may become old before it becomes rich. China needs to prepare for its future as an aging society by revamping its healthcare industry and looking for opportunities among senior consumers.

The future reserve currenciesDanniel Hui (SERI Quarterly) Oct 20, 2011
The outlook for the main currencies of the future, particularly the US dollar and the Chinese yuan. Hui believes that the dollar is set for a decline in importance, while the yuan is set to grow into an anchor currency for Asia and beyond. Any changes, however, are likely to take decades.

Blame the Fed for the Financial CrisisRon Paul (WSJ) Oct 20, 2011
The Fed fails to grasp that an interest rate is a price, the price of time. Attempting to manipulate that price is as destructive as any other government price control.

China’s Crippled Financial SectorYao Yang (Project Syndicate) Oct 20, 2011
Even in the best of times, it is difficult for China’s small and medium-size enterprises to get bank loans. But, with the current regimen of credit austerity making conditions for SMEs worse, the financial sector – the least reformed sector in China – now is suffocating the beating heart of the country’s economic dynamism.

Germany has leading role in eurozone dramaTony Barber (FT) Oct 20, 2011
Paris, with pressure on its AAA credit rating, can no longer pretend to be Berlin’s equal and any result is likely to be on Merkel’s terms.

Three Ways to Save the EurozoneJean Pisani-Ferry (Project Syndicate) Oct 21, 2011
Since the summer, the continuing installments of the Greek crisis have concealed a worrying process of fragmentation in the eurozone. The decision to reform the surveillance of governments and banks, and to boost the European Financial Stability Facility, is a welcome response, but the key issue is how to construct a more robust monetary union.

Who Was the Richest Person Ever?Branko Milanovic (Globalist) Oct 21, 2011
Frustration over income inequality has given rise to protests in the United States and abroad. An answer to the question of who was the richest person to have ever lived.

The Case for EurobondsJohn Bruton (Globalist) Oct 21, 2011
How eurobonds would help Europe to provide part of the world’s economic solution — rather than being the world’s economic problem.

Synthetic Bonds Are the Answer to Euro-Area CrisisHarald Uhlig (Bloomberg) Oct 21, 2011
The euro area is burning and policy makers seem increasingly powerless to douse the flames. Meanwhile, we can only stand by and watch this nerve-wracking spectacle. Yet the situation may not be utterly hopeless. In the last month or so, researchers have floated proposals for the creation of synthetic euro bonds that may offer a way out. The idea rests on three principles: No cross-subsidization between countries; safety; and the replacement of risky sovereign debt by synthetic bonds in European Central Bank repurchases.

Dollar's History Points to Future of Global Monetary SystemIMF Survey Oct 21, 2011
Long-term strengthening of the international monetary system will require concerted efforts from policymakers in advanced and emerging economies alike, a Washington seminar heard. The event discussed a new book on the rise of the dollar in the 20thcentury by Berkeley economics professor Barry Eichengreen.

Europe's savior: A new Deutsche MarkBrett Decker (WT) Oct 21, 2011
The utopian dream of a United States of Europe is coming apart at the seams. Greece, Italy, Portugal and Spain are all on the verge of default, which would push the rest of the common market into the abyss. For once, Paris is refusing to surrender and continues to fight the inevitable downgrade of France's credit rating. The European Central Bank isn't strong enough to do much to prevent a continental banking meltdown. Overall, European economic chaos makes U.S. fiscal indiscipline look manageable. This is slim comfort, however, because in the modern global economy, we all sink or swim together.

Why Europe DithersHolman Jenkins (WSJ) Oct 21, 2011
German voters don't want to bail out French banks and the French government can't afford to.

Will Mrs. Merkel Wake Up in Time?NYT Oct 21, 2011
If Europe's leaders do not come up with a more robust plan, the judgment of global stock and credit markets is likely to be harsh and swift.

Europe pays for lost characterReuven Brenner (AT) Oct 22, 2011
Europe is paying the price of two decades of handing out money to countries that barely had a pulse - a far cry from when J Pierpont Morgan argued that the sole criterion for extending a loan should be the "character" of the borrower.

Why do we need a financial sector?Wouter den Haan (VoxEU) Oct 24, 2011
This column launches a new Vox Debate titled “Why do we need a financial sector and how much should we pay for it”. The column argues standard measures of the financial sector’s economic contribution overestimate its true value to a modern economy. As such, regulation that makes it more difficult for the sector to perform some activities is not necessarily a bad thing.

A comprehensive strategy for the Eurozone crisisJeromin Zettelmeyer (VoxEU) Oct 24, 2011
Eurozone leaders are struggling to put together a rescue package to save the single currency. This column, which arose from discussions among many experts at the World Economic Forum’s Global Agenda Council Summit in Abu Dhabi, presents the outlines of a plan to put out the flames that threaten the euro’s existence while simultaneously setting the Eurozone on a medium-term sustainable path.

What Occupy Wall Street Gets Wrong About InequalityDouglas Holtz-Eakin (FA) Oct 24, 2011
The protestors of the Occupy Wall Street complain about the unfairness of the bailout, unemployment, and taxes. But to make the U.S. economy more fair, Washington needs to use the capitalist system, not to destroy it.

Bias, Blindness and How We Truly Think (Part 1)Daniel Kahneman (Bloomberg) Oct 24, 2011
Most of us view the world as more benign than it really is, our own attributes as more favorable than they truly are, and the goals we adopt as more achievable than they are likely to be. We also tend to exaggerate our ability to forecast the future, which fosters overconfidence.

Bias, Blindness and How We Truly Think (Part 2)Daniel Kahneman (Bloomberg) Oct 25, 2011
In 1738, the Swiss scientist Daniel Bernoulli argued that a gift of 10 ducats has the same utility to someone who already has 100 ducats as a gift of 20 ducats to someone whose current wealth is 200 ducats.

Italy’s Capital Flight (Project Syndicate) Oct 25, 2011
When it comes to refinancing Italy, bond purchases are just the tip of the iceberg: in August alone, Italy’s central bank drew €40 billion in credit from the ECB system, and it probably drew roughly another €50 billion in September. This is not the end of the world – not even for the ECB – but the eurozone has entered dangerous territory.

Britain’s Path of DenialAndrés Velasco (Project Syndicate) Oct 25, 2011
The worse the British economy tanks, the more fervently Prime Minister David Cameron’s ministers and Tory economists insist that draconian spending cuts are good for economic growth. The longer this goes on, the more serious the problem will become, making a non-inflationary recovery even more difficult to achieve.

Dying to Grow?Henry I. Miller (Project Syndicate) Oct 25, 2011
Studies that show an association between a factor and a health effect should be regarded as no more than a preliminary result that points researchers toward further research and analysis. But even professional regulators, who should know better, sometimes don't, as a recent advisory about human-growth hormone shows.

The EU's 'Make or Break Moment'Charles A. Kupchan (CFR) Oct 25, 2011
The European Union will likely survive this crisis and could even grow stronger by creating more capable institutions to oversee the euro.

Resolving the current European messCharles Wyplosz (VoxEU) Oct 25, 2011
A series of policy mistakes have put Europe on the wrong path. This column says that the current plan to enlarge the EFSF and recapitalise banks through markets will fail. The twin crises linking sovereign debts and banking turmoil need to be addressed simultaneously for Europe to avoid economic disaster.

The future of cross-border bankingDirk Schoenmaker (VoxEU) Oct 25, 2011
Responses to the financial crisis have largely been along national lines. Governments rescued banks headquartered within their borders, and supervisors are requiring banks to match their assets and liabilities at a national level. This column says stable cross-border banking is incompatible with national financial supervision, which means the European banking market needs European authorities.

Why are unionised countries often successful in attracting foreign direct investment?Andreas Haufler & Ferdinand Mittermaier (VoxEU) Oct 25, 2011
If there is a thing that most policymakers are happy to receive, no matter where they are in the world, it is foreign direct investment. But how do you attract companies to your country if unionisation is pushing up wages? Surprisingly, countries with strong unions have been relatively successful. This column explains how.

The Dodd-Frank Act, systemic risk and capital requirementsViral Acharya & Matthew Richardson (VoxEU) Oct 25, 2011
Macroprudential regulation aims to reduce systemic risk by correcting the negative externalities caused by breakdowns in financial intermediation. This column describes the shortcomings of the Dodd-Frank legislation as a piece of macroprudential regulation. It says the Act’s ex post charges for systemic risk don’t internalise the negative externality and its capital requirements may be arbitrary and easily gamed.

The changing role of emerging-market banksNeeltje van Horen (VoxEU) Oct 25, 2011
The global financial crisis has hurt banks in both advanced and emerging economies, but this column says the turmoil has favored the emerging-market entities in relative terms. It predicts a growing role for emerging-market banks in the global financial system, particularly in their own regions.

Destabilising market forces and the structure of banks going forwardArnoud Boot (VoxEU) Oct 25, 2011
The financial sector has become increasingly complex in terms of its speed and interconnectedness. This column says that market discipline won’t stabilise financial markets, and complexity makes regulating markets more difficult. It advocates substantial intervention in order to restructure the banking industry, address institutional complexity, and correct misaligned incentives.

Finance, long-run growth, and economic opportunityRoss Levine (VoxEU) Oct 25, 2011
Financial systems support and spur economic growth. But does financial innovation foster financial development? While recent innovations have done damage, this column says the long-run story is that financial innovation is essential for economic growth.

The Future of Banking – solving the current crisis while addressing long-term challengesThorsten Beck (VoxEU) Oct 25, 2011
For better or worse, banking is back in the headlines. From the desperate efforts of crisis-struck Eurozone governments to the Occupy Wall Street movement currently spreading across the globe, the future of banking is hotly debated. This VoxEU.org eBook presents a collection of essays by leading European and American economists that discuss both immediate solutions to the on-going financial crisis and medium- to long-term regulatory reforms.

Coins to Credit Cards, a Short History of MoneyNeil MacGregor (Bloomberg) Oct 25, 2011
We’ve all grown so accustomed to using little round pieces of metal to buy things, it’s easy to forget that coins arrived quite late in the history of the world. For more than 2,000 years, states ran complex economies and international-trading networks without a coin to hand.

Be bold, Mario, put out that fireMartin Wolf (FT) Oct 25, 2011
You must choose between two paths: the orthodox one leads towards failure; the unorthodox one should lead towards success.

Trade talks offer leadership test for NodaMure Dickie (FT) Oct 25, 2011
Regional trade pact has awarded Yosihiko Noda the perfect opportunity to show the kind of decisive leadership that has been so sorely lacking

Clearinghouse Over-ConfidenceMark Roe (Project Syndicate) Oct 26, 2011
To reduce the chance that a financial meltdown like that of 2007-2008 will recur, regulators are now seeking to buttress institutions for the longer run by strengthening clearinghouses for derivatives – instruments that accelerated the implosion of AIG and others in the last financial crisis. But a clearinghouse is no panacea.

Strengthening the StabilizersOlin L. Wethington (Project Syndicate) Oct 26, 2011
The G-20 summit in November is a major opportunity to address the mandate, governance, and institutional capacity of the Financial Stability Board, the international body that monitors, and makes recommendations about, the international financial system. But, while the FSB should be strengthened, it must not become a new bureaucracy.

Riots and revolutions in the digital ageChris Ellis & John Fender (VoxEU) Oct 26, 2011
For the Arab Spring it was Twitter; for the summer riots in London it was BlackBerry Messenger. This column explores how the latest technology is helping to accelerate ‘information cascades’, where people make decisions based on what they see other people doing – and getting away with.

European summits in ivory towersPaul De Grauwe (VoxEU) Oct 26, 2011
The Eurozone crisis plays on to a familiar tune. Finance ministers meet on the weekend only for markets to dismiss their efforts the following Monday. This column argues that Europe’s leaders have lost touch, that the ECB has the firepower but is not prepared to use it, and that the outcome of all this is depressingly clear: Defeat by the financial markets.

How the Euro Zone Can Restore ConfidenceDavid Malpass (WSJ) Oct 26, 2011
Investors are looking for a home for trillions in idle Federal Reserve-generated dollars, and a little reform in Europe might attract them.

Global: Delaying the End-GameGerard Minack (MS GEF) Oct 26, 2011
On a long view, I’m bearish on the end-game for all the highly indebted economies.

China a 'Precocious' Superpower?Arvind Subramanian (PIIE/Business Standard) Oct 26, 2011
Can a country that is not amongst the richest in the world and also not at the economic and technological frontier be a superpower? That is one of the most common questions raised against the central assertion in my recent book that China's economic dominance is more imminent, broader in scope, and greater in magnitude than is currently imagined.

Road to Ministerial Appears Murky as WTO Members Explore OptionsBridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
The past week has seen a flurry of activity at the WTO in preparation for the upcoming December ministerial. With the event less than eight weeks away, delegations are pushing to finalise items for inclusion on the ministerial agenda before next week's 2 November deadline. Meanwhile, members are also exploring the option of an "early harvest" for some Doha items in an effort to move past the current negotiating impasse. Today also saw the General Council approve Vanuatu's accession to the global trade body.

'Green Economy' Generates Trade Concerns in Run-Up to Rio+20Bridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
Participants in recent regional meetings paving the way for the Rio+20 Conference next June have struggled to find agreement on the concept of a 'green economy.' While some see a redefinition of the economy in green terms as a path towards sustainable development, others fear the concept is synonymous with green trade protectionism and conditionalities - to the point where participants at one regional meeting chose not to mention the green economy in their meeting conclusions.

Disputes Roundup: China in the Spotlight over Zeroing, Internet CensorshipBridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
This past week has seen the US and China continue to spar over trade policies, drawing the attention of international trade law observers. While bringing a new "zeroing" dispute on anti-dumping duties on shrimp and diamond sawblades in its own right, Beijing was also recently asked by Washington to explain its internet regulation policies and the trade impact of periodically shutting down US business' websites in China.

WTO Accession: Russia Strikes Deal with EUBridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
Russia and the EU announced on Friday 21 October that they had reached an agreement regarding Russia's accession to the WTO. While disagreements continue between Russia and neighbour Georgia, the EU agreement puts Moscow one step closer toward becoming the global trade body's next member.

US Farm Bill Talks Push Forward at Breakneck PaceBridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
A fast approaching deadline has kicked negotiations for the US 2012 omnibus farm legislation into overdrive. The domestic US budget debate has pressed lawmakers into an unusually sharp timeline to reach a compromise between various agricultural interest groups.

Rare Earths: Largest Chinese Producer Shuts Off Production for a MonthBridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
While the WTO has been quiet as of late on the contentious rare earths front, trade in the precious materials has been shaken quite a bit over the past months. The global rare earths market has recently experienced massive upheaval, with prices falling sharply in June 2011. In response, China's largest rare-earth producer, Inner Mongolia Batou, announced last week that it would be halting production for four weeks' time.

Euroland’s hidden balance-of-payments crisisThomas Mayer (DB Research) Oct 26, 2011
Below the surface of the euro area’s public debt and banking crisis lies a balance-of-payments crisis caused by the misalignment of internal real exchange rates. The path of least resistance seems to be an appreciation in creditor countries through the inflation of goods, services and asset prices. But will the electorates in the creditor countries accept a policy of easy money and exchange rate depreciation or push an exit from EMU? The authorities in creditor countries could insure their population against inflation and a soft currency policy by offering them index-linked securities that would convert into a new currency should these governments eventually decide to abandon the euro. Alternatively, authorities could aim at generating a combination of intra-EMU transfers, deflation in the debtor countries and inflation in the creditor countries such that the economic pain felt in each country group is shared between them in a way that leaves it below the level triggering a break-up of EMU.

Does Redistributing Income Reduce Poverty?Jagdish Bhagwati (Project Syndicate) Oct 27, 2011
Many on the left are suspicious of the idea that economic growth helps to reduce poverty in developing countries, and that redistribution is the key to poverty reduction. These assertions, however, are not borne out by the evidence.

Europeanizing EuropeJoschka Fischer (Project Syndicate) Oct 27, 2011
The eurozone is at the center of the global financial crisis, because only there, in the realm of the second most important currency after the dollar, does the crisis hit a weak structure rather than a state with real power. Anything less than a United States of Europe will not be powerful enough to prevent the looming disaster.

The Vatican Versus Washington and Wall StreetGlobalist Oct 26, 2011
As we shift from a G7 world to a G20 world, it is clear that current forms of global governance need to be re-envisioned. In this Globalist Document, we present the Vatican’s call for a more-inclusive system of global governance — and a fairer economic system.

Bias, Blindness and How We Truly Think (Part 3)Daniel Kahneman (Bloomberg) Oct 26, 2011
Take a look at the photos of two pairs of eyes, and take note: Your heartbeat accelerated when you looked at the left-hand figure. In fact, it accelerated even before you could label what is so eerie about the picture.

Bias, Blindness and How We Truly Think (Pt 4)Daniel Kahneman (Bloomberg) Oct 27, 2011
Early in the days of my work on the measurement of experience, I saw Verdi’s opera “La Traviata.” Known for its gorgeous music, it is also a moving story of the love between a young aristocrat and Violetta, a woman of the demimonde.

Coordinating bank failure costs and financial stability: Lessons for the EZMarco Spaltro & Iman van Lelyveld (VoxEU) Oct 27, 2011
The dissent brewing throughout Europe hinges on the question of whether the financial burdens of the Eurozone crisis should be shared between weak and strong. This column presents a new paper arguing that the wealthier, more stable economies don’t have much choice.

EZ rescue: Déjà vu all over againGuido Tabellini (VoxEU) Oct 27, 2011
EU leaders are at it again. This column argues that the crisis won’t be over until the underlying flaw of the euro is fixed – namely the separation of monetary and fiscal policy. German public opinion has to realise that the euro was built on imperfect foundations and that these imperfections must be corrected. Meanwhile, the Italian president of the ECB will need all his technical and political expertise to keep the Eurozone together.

The new, post-crisis global economic geographyIgnacio Munyo & Ernesto Talvi (VoxEU) Oct 26, 2011
The global crisis crippled advanced economies, but it also freed up financial resources that flooded emerging markets. This column introduces an index to identify the post-crisis winners and losers, digging into the causes of the new economic geography and exploring the vulnerability of emerging economies to a recurrence of a Lehman-type virus.

Can It Be Rescued?Sebastian Mallaby and Benn Steil (CFR) Oct 27, 2011
European leaders, meeting in Brussels into the early hours Thurdsay morning, agreed on a three-pronged deal to address a widening eurozone sovereign debt crisis. Mallaby and Steil analyze the implications of this deal on the eurozone, the G20, and the U.S. economy on this breaking news call. Read More »

The Past, the People, the PoliciesSpyros Andreopoulos (MS GEF) Oct 28, 2011
Understanding monetary policy currently requires understanding the thoughts of the people that make it.

Europe’s Dying Bank ModelGene Frieda (Project Syndicate) Oct 28, 2011
The good news for Europe is that it will not reenact the dramatic collapse of Lehman Brothers, thanks to the ECB’s unlimited ability to provide liquidity. But European leaders have yet to recognize that old bank business models are obsolete, and that reliance on private-sector leverage for repairing banks' balance sheets is doomed to failure.

America's Other 87 DeficitsStephen S. Roach (Project Syndicate) Oct 28, 2011
The US runs a huge trade deficit with China, but it also runs deficits with 87 other countries. These deficits cannot be fixed by putting pressure on one of the bilateral components – but try telling that to America’s growing chorus of China bashers.

EZ rescue or recession? Fallout of the October 2011 packageRichard Baldwin (VoxEU) Oct 28, 2011
Markets loved the EZ rescue. This column argues that it was short-term good news in that it defused ‘the bomb’ – the possible catastrophe vortex of failing banks and defaulting sovereigns. The bad news is that it will induce a recession. Banks will create a credit crunch in trying to meet capital adequacy ratios, and the new austerity will create a fiscal contraction. The recession will weaken banks, sovereigns, and Greece. We’ll be needing another crisis summit by Spring 2012.

Capital flows and growth: 1990–2010Joshua Aizenman, Yothin Jinjarak & Donghyun Park (VoxEU) Oct 28, 2011
The relationship between financial openness and economic growth remains the subject of heated controversy. This column examines the links between economic growth and FDI, portfolio investment, equity investment, and short-term debt in the last 20 years. It finds a large and robust relationship between growth and FDI but not with other types of financial flows.

Goldmanite Quant Derman Slams Wall Street's HypocrisiesJames Pressley (Bloomberg) Oct 29, 2011
Disturbed, disillusioned and ashamed: Those aren’t emotions you expect a Wall Street quant to express when asked why taxpayers were obliged to bail out wealthy bankers. Unless, of course, the quant is Emanuel Derman, a particle physicist and former head of quantitative finance at Goldman Sachs.

Upstream sovereignsLaura Alfaro, Sebnem Kalemli-Ozcan & Vadym Volosovych (VoxEU) Oct 29, 2011
With all the focus on Europe, it is easy to ignore the argument that global imbalances remain a drag on economic recovery. This column decomposes international capital flows into public and private components and claims that upstream flows from emerging to advanced economies and global imbalances in general are the result of the same underlying factor.

The End of Population GrowthSanjeev Sanyal (Project Syndicate) Oct 30, 2011
The UN forecasts that world population will rise to 9.3 billion in 2050 and surpass 10 billion by the end of this century. But such forecasts misrepresent underlying demographic dynamics: The future we face is not one of too much population growth, but too little.

The G-20’s Helpful Silence on Capital ControlsJose Antonio Ocampo, Stephany Griffith-Jones & Kevin P. Gallagher (Project Syndicate) Oct 30, 2011
When French President Nicolas Sarkozy took the reins as host of this year’s G-20 summit, to be held in Cannes on November 3-4, he called on the IMF to develop an enforceable “code of conduct” for the use of capital controls in the world economy. But, while the IMF’s proposed code is a step in the right direction, it is misguided.

Is the recent bank stress really driven by the sovereign debt crisis?Guntram Wolff Oct 30, 2011
Stress in the interbank market has increased dramatically since July 2011, and bank stock market valuations have fallen by 22% on average for 60 of the most important banks subject to stress tests. This column argues that bank stock valuation has been affected by the banks’ exposure to Greek debt and that Greek banks were particularly affected. Holdings of debt of the other four periphery countries does not, however, appear to be a strong determinant of stock price movements.

Investment bankingCharles A.E. Goodhart (VoxEU) Oct 31, 2011
As protestors occupy Wall Street and financial centres around the world, among the grievances are “socially useless” investment banks. This column argues, however, that investment banking is critical to any effective economy – the idea that policymakers can safeguard retail banking alone is not only tragically mistaken but also horribly dangerous.

Should India set up a sovereign wealth fund?Kavaljit Singh (VoxEU) Oct 31, 2011
In 2007 China set up its sovereign wealth fund, the China Investment Corporation, with an initial capital fund of $200 billion. Since then, Asia’s other emerging economic power – India – has been wondering if it should follow. This column argues that such a move is ill-advised and that India has more worthy investment opportunities at home.

The Eurozone needs exit rulesChristian Fahrholz & Cezary Wójcik (VoxEU) Oct 31, 2011
With the sovereign debt crisis spreading across Europe, there is no shortage of suggestions on how to save the Eurozone. This column says exit rules are the silver bullet. It argues that exit rules would decrease the probability of a breakup of the Eurozone by enhancing market discipline, increasing the political bargaining power of EZ members vis-à-vis the profligate countries, enhancing internal discipline in the profligate countries, and reducing market uncertainty.

Eurozone crisis: Credibility is not everythingPaolo Manasse (VoxEU) Oct 31, 2011
Many have argued in recent months that the Eurozone’s emergency meetings should be about restoring credibility, with a ‘big bazooka’ or otherwise. This column looks at Italy, a country financiers are fast turning their back on. It argues however that the problem is Italy’s fundamentals – not its credibility.

Preventing digital trade war in the cloudAlan Raul (WT) Oct 31, 2011
Just about the last thing the world economy needs right now is a trumped-up digital trade war over electronic data stored and processed on servers located virtually anywhere. However, unless the governments of the United States and Europe and multinational tech companies start talking soon about reconciling and simplifying international data-protection rules, some ominous storm clouds could threaten trans-Atlantic e-commerce.

Europe accepts the inevitableNita Ghei (WT) Oct 31, 2011
The new European rescue deal is being put in place. While details are still being hammered out, it will effectively allow Greece to default on its debt - despite protestations to the contrary.

The ECB’s Battle against Central BankingJ. Bradford DeLong (Project Syndicate) Oct 31, 2011
When the European Central Bank announced its program of government-bond purchases, it let financial markets know that it thoroughly disliked the idea, was not fully committed to it, and would reverse the policy as soon as it could. But the ECB's refusal to accept responsibility for financial stability flies in the face of the history of central banking.

Obama and Asia’s Two FuturesYuriko Koike (Project Syndicate) Oct 31, 2011
Despite the relentless shift of global economic might to Asia, and China’s rise as a great power, America’s focus over the past decade has been elsewhere. In November, Barack Obama can begin to correct that when he hosts the Asia Pacific Economic Cooperation summit in his native state of Hawaii.

The Coming Global Credit GlutAndrew Sheng (Project Syndicate) Oct 31, 2011
When world leaders meet at the end of this week at the G-20 in Cannes, France, the next economic minefield that they will face is already coming into view. It is likely to take the form of an opaque global credit glut, turbocharged by the fragile mixture of too-big-to-fail global banking with shadow banking.